Identity Thieves Filed for $4 Million in Tax Refunds Using Names of Living and Dead

Share

Identity Thieves Filed for $4 Million in Tax Refunds Using Names of Living and Dead

A group of sophisticated identity thieves managed to steal millions of dollars by filing bogus tax returns using the names and Social Security numbers of other people, many of them deceased, according to a 74-count indictment unsealed in Arizona Thursday.

The thieves operated their scheme for at least three years from January 2005 to April 2008, allegedly filing more than 1,900 fraudulent tax returns involving about $4 million in refunds directed to more than 170 bank accounts. The conspirators used numerous fake IDs to open internet and phone accounts, and also used more than 175 different IP addresses around the United States to file the fake returns, which were often filed in bulk as if through an automated process.

According to authorities a Californian, 29-year-old self-described hacker named Daniel David Rigmaiden, aka Steven Travis Brawner, was the ringleader of the group. He conspired with Ransom Marion Carter, III, 43 of Arizona and at least one other conspirator who was arrested in Utah in 2008 but has not been identified in court records.

Rigmaiden has been in custody since May 2008, but Carter is still at large. The two are charged with 35 counts of wire fraud, 35 counts of identify theft, one count of unauthorized computer access and two counts of mail fraud. Authorities are also seeking a monetary judgment in the amount of $5.5 million.

Rigmaiden is representing himself after firing three attorneys, and could not be reached in prison for comment.

The IRS allows taxpayers to file their returns electronically and obtain their refunds through direct deposit to a bank account or to a pre-paid debit card account, which lets them withdraw the funds from an ATM.

The scam took advantage of the IRS' quick turnaround in processing refunds for electronically filed returns. The IRS typically processes a refund request without verifying the taxpayer's information – such as whether the taxpayer is alive – or confirming that the taxpayer is legitimately owed money. The crooks just needed names and Social Security numbers of victims, which they acquired from various sources, and a company's name and tax-ID number to list as an employer.

According to a revised indictment filed January 2010 (.pdf), the investigation (which involved agents from the IRS, FBI, and the U.S. Postal Inspection Service) began in May 2007, when the IRS zeroed in on a business bank account Carter opened at Compass Bank in Arizona that appeared to be set up to receive fraudulent refunds. The account, in the name of Carter Tax & Accounting, accumulated $340,000 from 200 fraudulent returns, which Carter allegedly converted to cashier's checks.

The agents' first big break in the case came in 2008, when another criminal, facing unrelated state charges in Arizona, told authorities he knew about the scheme, and offered to help their investigation. The informant joined the gang, setting up a fake tax preparation business to process the false returns for Rigmaiden – whose identity was then unknown – and the Utah conspirator, as well as a business checking account to receive the refunds. About 360 fake returns were filed in the amount of nearly $700,000 in refunds. The informant then shipped the money – in $9,000 increments – to a drop address in Utah.

The Utah conspirator failed to hide his home IP address in communications with the informant, and undercover agents in Utah put him under surveillance. He was arrested on April 15, 2008 while leaving the drop location carrying $9,000. The Utah defendant subsequently became a confidential informant, agreeing to help authorities identify and catch Rigmaiden. According to a search warrant affidavit filed by IRS Special Agent Michael Fleischmann (.pdf), the Utah informant told authorities that Rigmaiden had once operated a website selling fake California driver's licenses at www.fakeid.tv, and that the two of them had been involved in a number of fraudulent schemes over several years.

In May 2008, the Utah informant shipped $68,000 to "Patrick Stout" in Palo Alto, California. Authorities say Stout was Rigmaiden. Rigmaiden gave the informant detailed instructions for "washing" the currency in lantern fuel to remove any drug or explosives residue that might be picked up by a drug-sniffing dog. He also told the informant to double-vacuum-seal the currency, place it in the cavity of a toy and gift-wrap the toy with a birthday card intended for a dying child. He would send someone armed with a semi-automatic rifle to pick up the package from the drop address.

Rigmaiden told the informant at various times that he was an encryption and privacy expert, and discussed building aerial drone assassins that would be perfect for taking out politicians by remote control, Fleischman wrote in his affidavit.

"I am probably the single biggest threat to the U.S. government currently living and they don't even know it," he allegedly bragged in an e-mail. "I can do things to the government that will make all these terrorist organizations look like sewing circles."

Agents moved in to arrest Rigmaiden in Santa Clara, California, in August 2008, and apprehended him after a foot and car chase.

During a subsequent search of an apartment and storage unit rented to Rigmaiden, investigators found about $116,000 in cash and more than $210,000 in gold and silver coins. They also found fake IDs and equipment for making fake IDs and bank cards, as well as surveillance cameras and other electronic equipment valued at about $200,000. They found no firearms.

Rigmaiden was using the name and Social Security number of Steven Travis Brawner at the time of his arrest – Brawner died in 1997 – and refused to provide his real name to authorities. He was only identified through fingerprint records. Rigmaiden has a prior felony conviction for using fraudulent access cards and had outstanding arrest warrants on a drug-manufacturing charge and a fraud charge, according to Fleishchmann's affidavit.

Included among about two dozen victims named in the indictment (whose names and Social Security numbers were used to file fake returns) are Nancy Dickinson, who died in 1979, according to the indictment, but was issued a $2,500 tax refund in 2007; Patrick C. Allen, who died in 1985, and filed a 2008 return for $4,300; and Salvadore Duarte, who died in 1989 and filed for a $4,900 refund.

Authorities tried to interest Rigmaiden in a cooperation deal. In January, he rejected the offer and, representing himself in court, filed a motion to unseal his case, which the court granted.

Rigmaiden's alleged fraud scheme is not new. In 2006, Brett Shannon Johnson was caught filing fraudulent tax returns in the names of dead people while working undercover for the Secret Service. Johnson, who went by the name "Gollumfun" online, estimated he stole about $2 million in fake refunds, some of it while working at a Secret Service field office in South Carolina helping agents catch credit card thieves.